Complete Guide to VAT in Cyprus: Rates, Registration, and Reporting

VAT in Cyprus - Three Types of Rates

There are four types of VAT rates in Cyprus:

1. Standard VAT rate,

2. Reduced VAT rates,

3. Super Reduced VAT Rate

4. Zero VAT rate.

How Much is VAT in Cyprus’s Regions?

Although no special VAT rates are applicable in Cyprus’s Regions, it is worth mentioning that before Brexit, there were special rules related to the United Kingdom Sovereign Base Areas of Akrotiri and Dhekelia. Under the previous regulations, transactions originating in or intended for these Areas were treated as transactions in or for Cyprus.

A Protocol relating to the Sovereign Base Areas (SBAs) of the United Kingdom in Cyprus was signed as part of the Withdrawal Agreement. The Protocol states that SBAs would be kept in the EU's customs territory, while EU legislation on VAT and excise duty continues to apply within the Base Areas.

VAT Registration Threshold

The Cyprus VAT law, regulations, and official notifications and instructions constitute a valuable source of information related to VAT rules in general, including those relevant to the VAT threshold in Cyprus.

While there is no VAT registration threshold for non-resident businesses, VAT Cyprus law defines a threshold for resident businesses as EUR 15,600 in 12 consecutive months.

EU-harmonized rules are implemented in Cyprus's national legislation. Therefore, a EUR 10,000 VAT registration threshold is implemented for intra-EU distance sales of goods and B2C supplies of services, and no registration threshold is provided for non-EU established suppliers of electronically supplied services.

Types of Taxable Activities in Cyprus

Under the Cyprus VAT laws, a taxable person can be any legal entity or natural person independently performing taxable activities, regardless of the purpose or results. Taxable activities include the supply of goods and services in Cyprus for a fee, receipt of reverse-charge services by a taxable person in Cyprus, and export and import of goods.

VAT Registration Process

In Cyprus, taxable persons who should register for VAT purposes or who wish to do so voluntarily should submit a Registration Application with supporting documents to the VAT register.

However, the process and required documents may vary for domestic and foreign taxable persons, such as businesses.

Cyprus VAT Registration for Domestic Businesses

The Registration Application and supporting documents should be addressed to VAT Services. In some cases, this process can be completed within a working day. Businesses engaged in taxable activities should register for VAT within 30 days from the end of the month in which they exceed the VAT registration threshold. 

The Tax Department is entitled to retroactively register any taxable person from the date they were required to register but did not do so.

The registration process can be completed electronically, and the documents required for this process differ for legal entities and individuals.

Cyprus VAT Registration for Foreign Businesses 

Foreign businesses carrying out distance sales or supplying goods and services to Cypriot customers should register for VAT purposes in Cyprus regardless of the annual turnover. This is because there is no VAT registration threshold for foreign businesses in Cyprus.

One crucial difference between the registration process of EU and non-EU businesses is that EU businesses are not required to appoint a tax representative to complete registration. In contrast, non-EU businesses should appoint one for all VAT compliance-related matters, including registration.

Additional information on the VAT registration process for businesses established outside Cyprus can be found in Circular ΕΕ 243, currently only available in Greek.

VAT Returns in Cyprus

The VAT returns in Cyprus usually cover quarterly taxable operations, and only in certain situations may the Commissioner of Taxation allow or require monthly and annual VAT returns. Taxable persons submit VAT returns electronically through the TAXISnet portal by the 10th day of the second month following the end of the reporting quarter.

Penalties for Failure to File Tax Return

Taxable persons who should register for VAT purposes but fail or do so late risk being penalized with a fine of EUR 85 per month for delay. In addition to this, the penalty for non-compliance with VAT registration rules, VAT Cyprus law defines a fine of EUR 51 for each VAT return filed after the deadline.

VAT Rules for Electronically Supplied Services 

The definition of Electronically Supplied Services (ESS) is implemented in Cyprus national legislation as part of the implementation of VAT rules defined by the EU VAT Directive. ESS are services automatically provided through an Internet or similar network, with minimum or no human input.

Despite using an EU-wide definition for ESS, other terms such as digital services, digital products, or electronic services may be found in national legislation across the EU. Nevertheless, they all refer to the same service, and the same taxability rules apply to ESS.

Taxability Rules for ESS:

Taxability rules for ESS were introduced in 2021 by adopting the e-commerce package to ensure uniformity of the regulations, reduce administrative burden, and make compliance more manageable and cost-effective.

These taxability rules define the general place of supply rules that apply to business-to-business transactions, B2B ESS supply. Regarding business-to-consumer transactions, that is, B2C ESS supply, non-EU suppliers should comply with EU rules defining the place of supply as the consumer's residence.

The EU-standardized threshold of EUR 10,000 impacts the rules related to distance sales of goods and B2C ESS. EU suppliers that reach the EUR 10,000 threshold should apply a VAT rate following the national legislation of the country where the consumer is located. Suppliers that do not exceed the threshold can apply the VAT rates of their home country, e.g., VAT rate Cyprus, or register for OSS voluntarily and comply with OSS rules.

How much is VAT in Cyprus on ESS?

The Cyprus VAT rate for ESS is 19%.

E-Commerce Rules

Cross-border sales of low-value goods, intra-community distance sales, deemed supplier rules, and supply of B2C services were all impacted and regulated in 2021 when a groundbreaking E-commerce reform was conducted at the EU level.

A uniform EUR 150 threshold for importing low-value goods from non-EU countries and territories was introduced, simplifying VAT and customs procedures. Under deemed supplier rules, digital platforms are considered taxable persons for VAT purposes in certain specified situations. 

As already mentioned, an EU-wide threshold of EUR 10,000 was introduced for intra-EU distance sales, thus removing thresholds set at national levels for each EU Member State. Finally, the scope and rules for Union and non-Union schemes became more comprehensive, and a new Import One Stop Shop (IOSS) was established. Therefore, the current OSS system has three schemes:

• Union Scheme,

• Non-Union Scheme,

• Import Scheme.

VAT EU Reporting

VAT EU reporting requirements implemented in Cyprus require taxable persons to submit EC Sales List and Intrastat reports.

EC Sales List

VAT-registered businesses and individuals trading within the EU should file a monthly EC Sales List (ECL). The ECl includes information on all transactions related to the supply of goods and services to another EU Member State, such as the place of residence and VAT registration of each customer in an EU Member State other than Cyprus. ECL is submitted electronically using TAXISnet by the 15th of the month following the reporting period.

Intrastat 

In Cyprus, if the taxable persons exceed the threshold of EUR 320.000 for intra-Union imports or EUR 75.000 for intra-Union exports. Besides this ‘exemption threshold,’ a so-called simplification threshold is set at EUR 2.700.000 for intra-union imports and EUR 5.800.000 for intra-union exports. 

Intrastat reports should be submitted to the Tax Department every month by the 10th day following the month in which the reporting obligation occurred.

The penalty for a late Intrastat return is EUR 15. However, an additional fine of up to EUR 2,562 can be imposed on taxable persons who continuously fail to comply with the withIntrastat reporting rules.

Digital Reporting

Local Businesses

In Cyprus, e-invoicing for B2B transactions is not mandatory, whereas for B2G transactions, the receipt and processing of e-invoices are mandatory. Public entities can use three methods to receive e-invoices: the PEPPOL network, a third-party invoicing provider, or the Ariadne platform provided by the Cypriot government. 

Non-Resident Businesses

There are no digital reporting requirements for non-resident businesses and individuals in Cyprus.